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Sharewatch: Diageo

In fairly low spirits

During the week of the G8 summit, the hotels division of Diageo — sole property, the Gleneagles hotel — had its place in the sun and on the world’s television screens.

But Gleneagles is a tiny part of the world’s largest drinks specialist, and all is not well in the beer and spirits world. While young Americans continue to buy shorts and cocktails, last week’s trading statement took the shine off Diageo’s share price with its warning that European consumers are cutting back spending in both beer and spirits.

Scotland, which produces all the whisky and much of Diageo’s gin and vodka in Europe, will be in the forefront of chief executive Paul Walsh’s challenge to the new kid on the block, the merged Pernod Ricard and Allied Domecq. It will become the second largest drinks producer later this month.